CNS Canada — Spring wheat futures on the Minneapolis Grain Exchange (MGEX) are trading right above major support and are poised to keep moving lower, according to an analyst.

The U.S. Department of Agriculture unexpectedly raised its estimate on the size of the U.S. spring wheat crop to 416.2 million bushels in a report released Friday. While the crop would still be well below the 532.2 million bushels grown the previous year, most traders had expected to see a downgrade from the August estimate of 402 million.

“The report was fundamentally negative for the wheat market as a whole, and we would expect that any type of rallies would be very limited,” said Tom Lilja, market analyst with Progressive Ag at Fargo, N.D.

The nearby December contract had trended higher for most of June, eventually hitting highs well above $8 (all figures US$). The move higher included a gap on the chart between $6.08 and $6.14 per bushel.

Minneapolis December wheat settled right in the middle of that key chart point on Tuesday, at $6.1225 per bushel.

With that gap now being filled, Lilja said the next downside target was the psychological $6 per bushel mark, with $5.75 representing the next downside target.

“The key right now will be holding the $6 level,” said Lilja, adding that would be difficult, with rising production estimates out of Russia adding to the generally bearish tone in U.S. spring wheat futures.

“The only thing that can really help the wheat market now is the situation in Australia,” said Lilja. “If those yields come in significantly lower than expected, that’s really the only world news that would help the wheat market in the short term.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.